[Reporter’s Notebook] A Country Too Lenient on Embezzlement and Breach of Trust, Even When Lives Are at Stake

Minority shareholders opposing the delisting simplification policy held a rally on the 10th in front of the Korea Exchange in Yeouido, Seoul. They called for clearer delisting review criteria, the introduction of differentiated delisting procedures for embezzlement and breach of trust, enhanced transparency of companies and related institutions, and social public discussions to protect shareholder rights. 2025.02.10 Photo by Yoon Dong-joo

"Why do we have to suffer damage as well?"

Many small shareholders I have met so far have always been filled with anger. If it were simply an investment failure such as a stock price crash, they would not have been so furious. They were enraged because the stocks they held were suspended from trading or delisted due to allegations of embezzlement or breach of trust by the management. One small shareholder raised their voice, saying, "I am about to lose billions of won because of a crime I did not commit. How can I not be angry?"

The concept of a joint-stock company is known to have originated from the Dutch East India Company in 1602. At that time, the main business of the East India Company was trade with Asia, but due to the very long routes, the risk of investing large amounts of capital was high. Therefore, the East India Company adopted a method of receiving small investments from many people. In return, the East India Company reliably generated profits through professional managers and distributed dividends to investors. The money used to operate and develop the company came from the joint investors, the shareholders.

Embezzlement and breach of trust crimes occur when the property of 'me' and the property of the 'company' are not separated. A comprehensive investigation of first-instance rulings last year on embezzlement cases involving more than 500 million won revealed that the perpetrators embezzled company funds for personal living expenses or invested in stocks and cryptocurrencies. Some even embezzled nearly 1.4 billion won and squandered it on internet broadcasting BJ. Shareholders, unable to tolerate this, raised their voices but were often excluded. The company ignored shareholders' opinions at general meetings. Some companies dismissed angry shareholders as "repeating only extreme actions." With such an atmosphere prevailing, experts did not even list solving embezzlement and breach of trust issues as a condition for enhancing domestic corporate value. It was a laughable story that domestic joint-stock companies would continue embezzlement and breach of trust anyway, so it could not be resolved.

The issues of embezzlement and breach of trust must not be left as they are. We have witnessed that corporate embezzlement and breach of trust crimes can lead to someone's death. Death was not a one-time event. The surviving family members could not escape depression or even lost their health and died. Some were unable to continue their own livelihoods because they spent their time chasing the company to get their money back. However, the government's perception of embezzlement and breach of trust issues seems complacent. Several bills to raise sentencing standards for property crimes such as embezzlement and breach of trust were introduced in the 20th National Assembly, but the government opposed them, saying the punishments would be heavier than for murder. Ultimately, those bills failed, and strong punishments for embezzlement and breach of trust crimes remain elusive to this day.

The Dutch East India Company, which seemed eternal, declined from the late 17th century and eventually went bankrupt. Although Japan’s Tokugawa shogunate’s isolationist policies are also mentioned, internal corruption such as employee embezzlement is cited as a cause of decline. Becoming a country lenient toward embezzlement and breach of trust can lead to economic decline. Not only shareholders but many more ordinary people will become victims. It is time to heed the anger of small shareholders.